Getting Started in Commercial Real Estate Investing

Expanding your portfolio from single-family homes to multi-family deals is a great step … but there are other paths to an even bigger deal!

Commercial real estate investing means bigger properties and bigger opportunities … and it could yield BIG benefits for savvy investors.

From retail storefronts to office space to industrial warehouses … commercial property is full of options … each with their own pros and cons.

We’re excited to welcome to the show a seasoned investor who’s found success in single-family homes, multi-family apartments, and commercial properties. (He really knows his stuff.)

In this episode of The Real Estate Guys™ show, hear from:

  • Your host, Robert Helms
  • His co-host, Russell Gray
  • Founder and CEO of Wilson Investment Properties, Tom K. Wilson

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Considering commercial

Real estate is a resilient product … that’s why so many people are eager to get in the game.

There are tons of ways to invest in real estate. Most investors start with what they know … single family homes. But that’s not the only way!

We see commercial real estate as a great opportunity for beginning investors … and for experienced investors too.

But commercial real estate deals are not all created equally

There are different product types, different lease lengths, and different landlord laws. And then you have to choose between existing properties and new construction.

Tom K. Wilson has done half a billion dollars in real estate with thousands of units in many different places … and he knows the perks of commercial real estate.

Like many investors, Tom started his real estate career in the single family marketplace.

We promote the value of surrounding yourself with smart people …. and that’s exactly what Tom did. He soon realized an interesting pattern.

Most of the successful investors Tom knew were investing in areas away from where they lived. By investing several states away, investors found better deals and growing markets.

So, Tom started looking elsewhere. He found the Dallas market … and his first commercial deal.

Dallas was more landlord friendly than Tom’s resident Bay Area. It also offered more consistent cash flow and held up well during the recession.

Tom noted that there were some serious benefits to owning a commercial property as opposed to single-family homes or multi-family deals.

After the 2008 crash, these types of commercial deals were performing better than their residential cousins … and they tended to come with a higher level of professional management.

Typically when we talk about commercial property, we’re talking about leasing your property to a business rather than a person.

It could be a retail establishment, a strip mall, an office, a restaurant, a gas station, a bowling alley, or a manufacturing facility … it’s all commercial!

Like every asset class, there are pros and cons to investing in each type of commercial property.

Investing in industrial

Industrial properties can include warehouses, operation centers, distribution centers, and manufacturing sites.

Professional tenants that pay for a long time are one of the best things about industrial assets.

They’re also very versatile … a variety of businesses can use a property with wide open space, offices, and loading docks.

When searching for an industrial property, note rooftop expansion and passing traffic. Can the site offer prominent enough visibility to attract major brands?

Determine the path of progress for the community … this can signal if the area has the breadth of economy to support a big business.

Tom comments that manufacturing sites in particular could offer great opportunities for future returns as manufacturing makes a comeback in the United States.

The downside of industrial sites … they tend to be a single tenant product. If your tenant goes bankrupt, you’re left searching for a new source of cash flow.

“The odds of that happening are very low if you’ve done your due diligence during vetting,” Tom says, “so all in all I tend to consider the right industrial property a very good product.”

The details on retail

If you think everything is bought online … think again.

You can’t get a haircut online. You can’t meet your buddy for a drink online. You can’t take your dog to the vet online.

Everyone needs a place to live … and they often pick where they live based on where they can access essential services.  

“Retail has become a four-letter word for many investors,” Tom says. “I prefer to call these types of assets ‘neighborhood service centers’ because that is the key.”

Many large retailers are expanding their brick and mortar stores despite the online shopping craze … and online retailers like Amazon are investing in brick and mortar locations to build their brand.

Like any asset class, there’s the good, the bad, and the ugly … but don’t discount retail without the proper research.

Operating in office space

Every day, people wake up and go to work.

It’s true that more and more people are working from home … but there are still daily needs for human interaction in business.

“I don’t think it is realistic to believe we’re going to see the day where everybody’s working from home,” Tom says.

Both single and multi-tenant office spaces offer excellent opportunities for commercial deals.

Tom recommends looking for office spaces that combine work centers with service centers as the demand for more office space near entertainment venues and amenities rises.

Having an experienced team or partner on the ground that knows the area is especially important when buying office spaces. Locals will have the best read on where people want to spend their nine to five.

Commercial success through syndication

You don’t have to have a lot of money to get started in commercial real estate.

Tom has built his commercial real estate portfolio through the power of syndication.

At some point, you run out of your own purchasing power … you’re out of dollars and cents but not out of enthusiasm, passion, or expertise.

“Syndication is the law of compounding,” Tom says, “not just in numbers but in education, wisdom, and relationships.”

Partnering with those that have a proven track record, established credibility, and integrity sets you up for investment success.

And by combining financial assets, you can do bigger deals and see bigger returns together than you ever could alone … especially in the commercial space.

Like any investment, education is key.

Learn how to leverage experts through syndication and tips for successful commercial deals in Tom’s special report Commercial Real Estate – The Best Investment Secret.

Whether it’s your first deal or your first step into a new market, consider taking a look at commercial real estate investments to make equity happen.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Magna, UT Market Report

Magna, UT Market Report

 

Find the next big boom town in the Beehive state. Make your mark in Magna, Utah!

Utah is a market defined by consistent and rapid growth … the population is exploding and jobs are popping up at a record-breaking pace.

New tenants are flooding the towns in the valleys south of the Great Salt Lake … and Magna, Utah, is particularly magnetic.

Magna is tucked right in the middle of a growing industrial space. It’s down the road from the expanding Salt Lake City International Airport, new UPS and Amazon centers, and all the amenities of Salt Lake City.

Plus, take advantage of new tax breaks for real estate investors by investing in this SLC suburb … Magna is one of Utah’s Opportunity Zones.

In this special report, the team at Fourplex Investment Group shares the most relevant data on the Magna market. Find out:

  • Growth trends and predictions for the Salt Lake City area
  • Future building projects and investment opportunities
  • Stats on economic and business expansion
  • And more!

Discover whether Magna is the market for you! Get started by filling out the form below to access the Magna Market Report.

Cleveland

Cleveland

 

Once a forgotten city with a struggling manufacturing sector, Cleveland is rebuilding a stronger, more diverse economy and workforce. It is a diamond in the rust belt.

 

Cleveland is making a comeback.

Along with other industrial cities like Pittsburgh and Detroit, Cleveland saw a downward slope 

in the late 20th century that was only accelerated by the 2008 recession. Unemployment soared, and home values plummeted.

Now, a shifting focus to the healthcare and tech industries and a slow but steady return of manufacturing spells a new slogan for Cleveland … it’s Believeland, Ohio.

Here’s what’s changing in Ohio:

  • Diversified economy. Shuttering factories led to widespread unemployment. While some of those jobs have returned, it’s no longer the largest sector of the economy, and that diversity is promising for the future of the market.
  • The leader in healthcare. Cleveland Clinic is one of the best healthcare systems in the world and is the national leader in cardiology and heart surgery. Watch for continued growth in the biomedical industry.
  • An emerging tech hub. Greater access to capital, support for entrepreneurs, a low cost of living and a vibrant health tech corridor are just a few of the reasons why technology companies are choosing Cleveland as their home.
  • Eight Fortune 500 companies call it home. It’s not all surgery and computers here. Progressive Insurance, Goodyear Tire and Rubber, Sherwin Williams, and others provide jobs and revenue. And that influx of capital and people is revitalizing neighborhoods.
  • A newer, younger population. Millennials want to live closer to where they work and are coming back from the suburbs to the cities. Cleveland is the 8th fastest growing millennial population in the US, and they’re renting and purchasing homes.
  • Centralized location. According to Forbes, Ohio is within a day’s drive of 60 percent of the US GDP and 150 Fortune 500 businesses. It’s easy and cheap to get to many major cities.

Downtown Cleveland is changing rapidly. As the Health-Tech Corridor expands and innovates, Cleveland will continue to be a diamond in the rust belt.

Reports and Articles

Market Field Trips & Property Tours

Boots-on-the-Ground Teams

Clues in The News

It’s fun to LOVE the right real estate …

For Valentine’s Day we thought we’d muse on why the right real estate is easy to love.

Of course, the operative word is “right” … as in Mr. or Miss “Right” …

… because anyone who’s been in a bad relationship knows it’s hard to have the right relationship with the wrong person.

And the same is true with real estate.

Right now, stock investors are realizing their investment vehicle of choice is a little bi-polar.  When it’s good, it’s great.  But when it’s not … watch out below!

As we’ve already noted, we view the volatile stock market as a wonderful gift.

And while we don’t want to judge anyone else’s relationship … for us, it refreshes our love affair with the right real estate.

So let’s take a look at some clues in the news about where we might find the right real estate.

Retail vs Industrial vs Multi-Family

As is often the case, the flip-side of a problem is an opportunity.  In the case of the allegedly Amazon fueled retail apocalypse, the flip-side winner is industrial.

In fact, this NREI Online article reports on their survey of commercial real estate investors … and some interesting points are raised …

“ … the industrial sector is giving multi-family a run for its money.”

“ … whether it comes to occupancy rates, rents or even cap rates, sentiment has improved …”

“A majority [of respondents] think [the expansion cycle] will last more than a year …”

Now if you’re not a commercial property investor (yet) … there’s still useful insights here for you too.

For residential real estate investors … both single- and multi-family … it’s smart to pay attention to the flow of industrial and office investment.

After all, your residential tenants need places to work.

So when you see capital flowing into industrial and office properties, it can be a good sign for local area employment.

The survey also found …

“… a majority of respondents (64 percent) said warehouse / distribution facilities in traditional locations would be most in demand going forward.”

And quoting one of the respondents …

“E-commerce has resulted in changes to product shipment from distribution centers, as opposed to from retailers.”

These surveys are interesting because they represent fairly current viewpoints of marketplace actors.  These aren’t economists, researchers, or academics.

The respondents are the people with the checkbooks … who are deciding whether and where they’ll invest … or not.

So it’s one thing to listen to experts speculate on what decision-makers will do … and another to hear directly from market participants.

It’s just another of the MANY reasons why we attend live conferences where we can have “man in the market” conversations …

… often with people who have no marketing agenda … and are willing talk candidly about what they’re doing and why.  Those conversations are gold.

While far from scientific, it’s a great way to get a sense of a market, sector, or demographic … and affirm whether or not some pundit’s prediction has any real-world validity. 

Shift Happens

As e-commerce changes how retail businesses operate, their landlords feel the pain too.

But as the retail business shifts from walk-in to delivery service … while challenging for mall operators,  it means a big boom for distribution …

.. .and the markets, properties, and jobs that make distribution happen.

We’ve been longtime fans of distribution towns like Memphis and Dallas for this reason.

Other great things about distribution include the creation of working class jobs (great for tenants),  in relatively affordable areas (better ROI on properties).

And those jobs are impossible to offshore because the work needs to be done near the consumers.

Of course, we hope President Trump’s pledge to bring manufacturing back to the United States works out “bigly”.

So we’re watching for the revival of rust-belt markets.  If we see commercial money move in, then residential is probably not too far behind.

But until manufacturing brings the front-end jobs back to the U.S., distribution is the other end of the supply chain.

After all, when all the stuff made in China and Mexico arrives in the United States, it needs to be distributed to the local consumers.

Commercial Investing … Not Just for the Rich

If you’ve ever gone shopping for a warehouse, big apartment complex, or mobile home park, you probably noticed they’re a little pricey.

But you don’t need to feel left out.

The secret to going bigger is syndication.  It’s a way to take your real estate investing hobby and turn it into a full-time enterprise … with a lot of upside.

It’s not as complicated as it seems because you can even hire the experts and mentors you need in whatever niche you choose.

We’ve seen many mom-and-pop investors build big multi-million-dollar portfolios simply by sharing their deals with private investors.

Of course, the other side of the opportunity is to be one of those “silent partners” in a syndicated deal.

So we created the Investor Registry to help private investors find the kind of opportunities they’re interested in.

Looking for Mr. (or Miss) Good Deal

Only the older folks will have any idea what that means … but everyone who’s ever date to find a good match knows it can be a minefield.

And yet, almost everyone does it anyway.

We realize the urge to invest isn’t as compelling as … well, you know …

But the point is there’s some work to do to find the investment markets, sectors, and opportunities best for you.  No one can do it for you … and it won’t happen by itself.

But like true love … when you find it, it’s awesome and totally worth the effort.

Until next time … good investing!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

09/20/15: In Search of Yield – Creating Cash Flow from Commercial Real Estate

If you’ve ever wondered how to invest in commercial real estate, this is a great episode to get started with.Commercial real estate is a way for residential real estate investors to expand their horizons and find alternatives to houses and apartment buildings to create passive income from real estate

That’s because there are MANY ways to make money from commercial real estate.

And as we’ve been discussing for the last few episodes, with cash flows on residential real estate tightening, alert investors have already begun to widen their horizons.

In The Real Estate Guys™ radio show studio helping you widen your real estate investing horizons through a look at how to invest in commercial real estate investing:

  • Your wide open host, Robert Helms
  • His horizontal co-host, Russell Gray

Commercial real estate is both a deep and wide topic.

Flitting across the surface of the topic, there are three major categories of commercial:  Office, Retail and Industrial.

But that’s far from exhaustive.

And then going deep into each of the big three, there are all kinds of sub-categories.  And it’s WAY too much to cover in one episode.

So the purpose of this edition of The Real Estate Guys™ radio show is to give you an overview of some of the many options available when you enter the wide, wonderful world of commercial real estate.

How to Invest in Commercial Real Estate – OFFICE

How to invest in commercial real estate - Office buildings are an alternative to residential real estate for creating passive income through real estate investingWhen it comes to office real estate, the first thing most people imagine are office buildings holding white collar workers all sitting at desks starting at computer screens and shuffling papers.

But there’s more to office than just that.  And it’s a good thing.  Because as technology has empowered a virtual workforce, the need for mainstream office space has been affected.

Today, many people telecommute.  That means less desks…or some cases, shared space.

And with more people free lancing, executive suites and collaboration stations are growing in popularity.

Also, with so many records digitized, it’s less important to keep physical records in close proximity of workers.  This reduces the need for high priced office space, while adding to the demand for off-site record storage.

Yes, there are still businesses that retain hard copy documents for many years…often for compliance reasons.

How to Invest in Commercial Real Estate – MIXED-USE

Also growing in popularity are mixed-use buildings where people live above offices or retail space.  Part of this shift can be attributed to younger people waiting longer to start families and move to to the suburbs.

Another factor in the popularity of Mixed-Use is traffic congestion and people’s desire to reduce the amount of time they spend in cars to go to work, shop and socialize.

How to Invest in Commercial Real Estate – RETAIL

From strip centers, to shopping malls, to single-purpose structures like car washes or that coffee kiosk in the parking lot, retail real estate comes in a variety of shapes and sizes.

How to invest in commerical real estate - Retail real estate investing is an alternative to investing in rental houses to generate passive incomeAnd while office has certainly been affected by technology induced societal changes, retail much more so.

So as a retail real estate investor, it’s important to understand how the internet is affecting your tenants, the retailers.

One only needs to consider that Amazon, a company with not a single retail location, has surpassed Wal-Mart in terms of stock market capitalization.

People order MANY things on-line (one of the reasons we love markets like Memphis, Dallas and Atlanta that are distribution hubs).  This means they aren’t necessarily going to the corner store to buy them.

Therefore, a smart retail landlord manages his tenant mix carefully…preferring businesses whose products or services require customers to visit them.  You can’t order a sandwich, a mani-pedi, or a haircut online.

But it’s more than simply making sure your tenants have local customers and aren’t losing business to websites.

A good tenant mix will promote cross-selling.  So when a customer comes to the center to drop off their dry-cleaning, they can get get a haircut, or a teeth cleaning, or massage.

In other words, you are helping your tenants leverage each other’s traffic, by offering a complimentary mix of products and services and getting more of that customer’s spending to happen in your retail center.

How to Invest in Commercial Real Estate – INDUSTRIAL

Although it isn’t glamorous, industrial space can be a stable way to generate long term cash flows.

How to invest in commercial real estate - Industrial tenants often sign long term leases because it's expensive and difficult to move all their equipment to a new locationWhen a business rents a building and loads it up with equipment, whether it’s light manufacturing, auto repair or something else…it takes a lot of time and hassle to move.  So they don’t.

And they’re happy to rent because they don’t want to tie up their money in real estate.  They need it for equipment and inventory.

As you can see the list of commercial opportunities is long and diverse.  And we only scratched the surface.

But as people pile into pile into the the ever more crowded residential space because it’s easy to understand, if you’ll take some time to learn a commercial niche, you may find less competition and more profits are waiting for you.

Listen Now:

  • Want more? Sign up for The Real Estate Guysfree newsletter and visit our Special Reports library.
  • Don’t miss an episode of The Real Estate Guys™ radio show.  Subscribe to the free podcast!
  • Stay connected with The Real Estate Guys™ on Facebook!

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources that help real estate investors succeed.